NY budget, called a tax cutter, was built on hikes

ALBANY -- New York's budget that lawmakers will begin voting into law this weekend is based on their power to stop a sunset.

Two sunsets, in fact.

Gov. Andrew Cuomo and the Legislature are stopping the scheduled end, or sunset, of a temporary income tax increase on millionaires, and delaying the end of a big utility tax on businesses.

Those tax measures are two critical ways the budget will pay for several tax cuts and tax breaks that will mostly take effect in 2014, an election year for Cuomo and lawmakers.

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Starting next week, Cuomo and lawmakers will portray the budget one that cuts taxes despite continued hard fiscal times. They alternately term it the most business-friendly, most middle class-friendly and most family-friendly budget in years.

The budget came together after closed-door negotiations and was announced Wednesday night.

Albany politicians will tell constituents that most of them will get a $350 tax rebate check next year. The officials won't likely mention it will come from part of the $6 billion in income taxes millionaires will pay over three years.

Lawmakers will also say they are phasing out over three years the onerous utility tax paid by employers who already have some of the highest energy costs in the nation, but likely won't mention the tax was supposed to end this year.

"It's not a tax-cutting budget, no way," said E.J. McMahon of the fiscally conservative Manhattan Institute. "It's an election-year check in the mailbox, pure and simple."

In Albany, resurrecting taxes about to die is just part of the deal.

The extended taxes were not only needed to pay for the tax cuts for middle class families and mostly small businesses pushed hard by the Senate's Republican conference. Republicans needed the tax cuts to agree to the Assembly Democrats' top priority of an increase in the minimum wage, according to a senior administration official who spoke only on the condition of anonymity because closed-door budget strategy isn't supposed to reach the public.

The independent Citizens Budget Commission sees this budget as extending a temporary 2009 tax increase a second time. Cuomo and legislators also struck a deal even though their own commission that is developing broader, fairer tax changes is still in the early stages of discussion. The millionaires tax wasn't scheduled to sunset until next year, but action now avoids that election year action.

The fiscal watchdog called that "the wrong message."

The tax increases come from a governor who promised to end New York's image as a high-tax state. But economic recovery is much slower and more uneven than was predicted when Cuomo and the Legislature extended the millionaires tax the first time in 2011.

Oddly, the politicians seem to be underselling one of the budget's undeniable accomplishments.

The budget keeps state spending under 2 percent again, a streak under Cuomo that was once unthinkable even in hard times, while spending by state agencies is flat. In the public sector, with its wildly rising health care, labor and pension costs, that's akin to cutting up to 8 percent.

That's no minor feat considering the budget grew from $85 billion 10 years ago to $135 billion now and had average increases in spending of 6 percent -- with some hikes hitting 10 percent.

But voters should plan for a hard sell that this was a tax-cutting budget when Cuomo tours the state and legislators head back to their districts.

"The attitude of the governor and the Legislature seems to be that that they don't like the facts being written" in the press, McMahon said. "They want their spin ... but ultimately they don't care what you say and will go directly to the people and hammer them with, 'This is the best family-friendly budget in years!"'